The Great Money Migration

This past Saturday was “Bank Transfer Day,” a day of action in which thousands of people moved their money from “too big to fail” banking titans into credit unions and smaller regional banks. While it’s hard to tell precisely how many people followed through on their threats to close accounts on Saturday itself, over the past month credit unions have added 650,000 new members (as opposed to 80,000 in a regular month), resulting in more than $4.5 billion in new deposits.

As Sarah Jaffe at Alternet noted, ABC News aired a remarkable report calling the exodus of customers a “bank revolt” and stating, “as of today, 1 million consumers are hurling a lightning-bolt warning at the big banks, moving their money out in protest.”

“$4.5 billion here, $4.5 billion there, and pretty soon you are talking about real money, even for JPMorgan-Chase.”

Now, a lot of the impact of closing accounts might have been symbolic, and $4.5 billion might not be all that much money relative to the size of the banking system as a whole. But, as Salon’s Andrew Leonard writes, riffing on an old joke, “$4.5 billion here, $4.5 billion there, and pretty soon you are talking about real money, even for JPMorgan-Chase.”

All in all, Bank Transfer Day was a pretty powerful expression of collective disgust by Americans fed up with the goliath banks. Right?

Well, not everyone agrees. Leave it to the New Republic to publish a piece of smug nay-saying in which the writer shows himself to be far smarter than all those who had the nerve to take collective action.

In this case, Simon van Zuylen-Wood, a reporter-researcher for the magazine, penned an article entitled, “How Bank Transfer Day Will Help the Banks It’s Trying to Hurt.” He argued:

"[I]f the executives at the country’s biggest banks have circled Bank Transfer Day on their calendars, it’s probably not out of anxiety. Whatever the intentions of its organizers, Bank Transfer Day may end helping the very one percenters they mean to punish.

"At the root of the problem is that many Bank Transfer Day enthusiasts have overestimated their value to the banks they patronize: Ultimately, not all bank customers are made equal.... According to Jennifer Tescher, President and CEO of the consultancy Center for Financial Services Information, banks typically earn at about 80 percent of their deposit revenue from the top 20 percent of their customers."

In his post, van Zuylen-Wood goes on to explain that maintaining small checking accounts can actually cost big banks more money than the accounts generate in profits. And, owing to the passage of the Dodd-Frank bill last year, banks are limited in the amount they can charge in overdraft or “swipe fees” that they previously used to make small customers worthwhile for them. He continues:

"Bank of America’s early October proposal to supplement its lost “swipe fee” revenue using a five dollar per month charge to holders of debit cards should probably be understood in that context. It was designed to be a win-win proposition for the bank: either it earned $60 per year from each debit card customer with a checking count under $20,000...or it would drive unprofitable customers away from the bank entirely (or at least toward Bank of America credit cards, which have become more profitable than debit cards), to the benefit of the bank’s bottom line."

If the article were meant merely as an analysis of the business of handling small checking accounts, I would say that it makes some perfectly fair points. But it’s framed as something more than that—as a piece that analyzes the efficacy of a political action and that argues that those taking the action are naive. In that capacity, it is model of crap contrarianism. If I had a dollar for every self-satisfied commentary written (even by ostensibly sympathetic liberals) about protests being misguided and ineffective, I’d no doubt be able to join the wealthy elite that the #Occupy movement has been targeting. And I expect that I would earn about 80 percent of my deposit revenue from the New Republic.

The fact of the matter is that, if the big banks wanted to expel customers, they could easily do so. (Why not a $20 monthly fee for debit card use?) But far from receiving an eager farewell at bank branches eager to shed small-time depositors, many of those who have descended upon institutions such as Citibank demanding to close their accounts report encountering bank managers who tried to convince them to change their minds.

Of course, the “move your money” effort is not only a matter of individuals’ decisions about their personal finances. In the context of larger Occupy Wall Street mobilizations, many people were coupling the closing of accounts with demands for political change. That’s why others who have swarmed in as part of group actions have encountered police threatening (or even conducting) arrests.

Overall, Bank Transfer Day was part of a wave of public outrage, defiance, and protest that is doing significant damage to the banks’ reputations—which they evidently value. As van Zuylen-Wood himself notes:

"Ultimately, the Bank of America and its competitors chose not to go ahead with the five dollar charge, deciding that the hit to their PR wasn’t worth the potential gains to their bottom line. As Diane Casey-Landry, a former CEO of the American Bankers Association told me, the public outcry against BoA was enough of a 'reputational kick in the chin' that its top competitors—Wells Fargo, Citibank, and Chase—abandoned their proposed debit fees as well."

What is a day of action in which thousands close their accounts and denounce the banks as greedy if not another PR “kick in the chin”?

In his article, van Zuylen-Wood uses selective citation of a source to suggest that credit unions might not want the influx of new members:

"Worse yet, by transferring their money to credit unions, Bank Transfer Day participants may also be harming the very financial institutions they mean to help. These not-for-profit banking co-ops are governed by their depositors and are generally more customer-friendly than banks—although too big a customer base could threaten that. Indeed, a little more than a week ago, in anticipation of Bank Transfer Day, the National Credit Union Administration sent out a memo advising its federal regulators that a large influx of new customers could lead to long-term problems down the road, reminding them that credit unions are penalized if their retained earnings fall short of seven percent of their total assets. In other words, by inundating credit unions with a flood of capital they likely cannot profitably invest, the Bank Transfer Day participants may be pushing those institutions to abandon the perks that make them attractive, like free checking accounts.

"Bank Transfer Day gets one basic thing right: Checking account holders have a right to take their business wherever they wish. What they forget, however, is that not everyone will want the business they have to offer."

Except that, the credit unions do want the new business—and they’ve been very vocal about that fact. The same source that van Zuylen-Wood cites, the National Credit Union Association, sent out a press release last week lauding Bank Transfer Day and celebrating the influx of new members. It includes exuberant quotes from the organization’s president, Bill Cheney:

"'Many credit unions across the nation...are making special efforts to tap the surging interest in credit unions,' said Cheney.

“'They are conducting advertising campaigns both individually and cooperatively with others, sending ‘switch kits’ to existing members to share with family members or other prospective members, beefing up websites, extending hours and staffing for Bank Transfer Day, performing e-mail blasts to members, maximizing social media campaigns, putting up banners in lobbies or on their buildings, offering bonuses to members who bring in new members, and giving bonuses to members as well,' Cheney said."

The New York Daily News quoted another credit union executive basically saying the exact opposite of what van Zuylen-Wood wants to convey:

"'These are very good times for credit unions," said Kirk Kordeleski, CEO of Bethpage Federal Credit Union, one of Long Island’s largest with 24 branches and $4.4 billion in assets. 'All this conversation about fees has led to a lot of opportunity for us,' said Kordeleski, who saw a 60% hike in new members in October, to 1550 from 925."

This Changes EverythingBe one of the first to receive a copy of "This Changes
Everything: Occupy Wall Street and the 99% Movement," edited by Sarah
van Gelder and the staff of YES! Magazine.

In general, “vote with your dollars” consumer actions are not my preferred model of organizing. Moreover, I have no illusions that the amount of money transferred by small account-holders, in itself, is going to cripple the banking giants. But my answer to people who raise that point is the same as my response to people who think that moving your money to a credit union is merely a lifestyle decision with no real political impact. The energy of something like Bank Transfer Day only feeds into other activist efforts and broadens the constituency supporting regulation of the financial sector. This weekend, activists got thousands of people to move their money. Next week they can find a new way to stick it to the big banks.

After all, protesters featured in the ABC News story weren’t just saying, “Close Your Account.” They had signs that said, “Make Banks Pay.” I think their detractors are going to have a hard time explaining how that demand ends up helping the one percent.